Tribunal upholds tax on foreign income & vessels under Sec 44BB, applies amendments prospectively

The Tribunal dismissed the assessee's appeal, upholding the inclusion of revenue from work performed outside India under Section 44BB and the taxability of income from providing vessels and equipment under the same section. The Tribunal ruled that the amendments to Section 44BB and Section 44DA should be applied prospectively. The issue of interest under Section 234B was remanded to the Assessing Officer for further verification. The Revenue's appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Inclusion of revenue from work performed outside India under Section 44BB.
2. Nature of income from providing vessels and equipment, and its taxability under Section 44BB versus Section 9(1)(vi) and 9(1)(vii).
3. Applicability of amendments to Section 44BB and Section 44DA.
4. Interest under Section 234B.

Issue-wise Detailed Analysis:

1. Inclusion of Revenue from Work Performed Outside India:
The assessee, a non-resident company, provided specialized vessels and crew to another non-resident company for survey work related to gas production in India. The Assessing Officer (AO) included revenue from activities outside India in the gross contract receipts under Section 44BB, treating it as fee for technical services (FTS) under Section 9(1)(vii). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this inclusion, referring to the jurisdictional High Court's decision in Sedco Forex International Drilling Inc. 299 ITR 238, which held that mobilization charges (work performed outside India) are includible under Section 44BB. The Tribunal, following this binding precedent, dismissed the assessee's appeal, affirming that revenue from mobilization charges was rightly included under Section 44BB.

2. Nature of Income from Providing Vessels and Equipment:
The Revenue argued that the income from providing vessels and equipment should be taxed as FTS under Sections 9(1)(vi) and 9(1)(vii), not under Section 44BB. The CIT(A) and the Tribunal, however, held that the income was taxable under Section 44BB, following the Tribunal's decision for the previous assessment year (AY 2008-09) in the assessee's case. The Tribunal noted that the nature of the vessels and the status of the assessee as a second-leg contractor remained unchanged, thus affirming the CIT(A)'s decision to tax the income under Section 44BB.

3. Applicability of Amendments to Section 44BB and Section 44DA:
The Revenue contended that the amendments brought by the Finance Act, 2011, to Section 44BB and Section 44DA should be applied retrospectively, as they were clarificatory. The Tribunal, however, held that these amendments, which adversely affect the assessee, should be applied prospectively. The Tribunal cited the Supreme Court's ruling in Sedco Forex International Drilling Inc. v. CIT, which stated that clarificatory amendments should be read into the main provision from the date it came into force only if they do not change the law. Thus, the Tribunal dismissed the Revenue's grounds, following its earlier decision in the assessee's case for AY 2008-09.

4. Interest under Section 234B:
The Revenue argued that interest under Section 234B should be charged, relying on the Uttarakhand High Court's decision in Maersk Co. Ltd. v. DIT. The Tribunal, referencing the Delhi High Court's decision in DIT v. Jacobs Civil Incorporated, held that interest under Section 234B is not chargeable if the assessee had no role in obtaining a lower or no deduction certificate. The Tribunal remanded the issue to the AO to verify if the assessee had obtained such a certificate. If not, no interest under Section 234B should be charged.

Conclusion:
The Tribunal dismissed both the assessee's appeal and cross-objection, affirming the CIT(A)'s inclusion of revenue from work performed outside India under Section 44BB and the taxability of income from providing vessels and equipment under Section 44BB. The Tribunal also held that the amendments to Section 44BB and Section 44DA should be applied prospectively and remanded the issue of interest under Section 234B to the AO for verification. The Revenue's appeal was partly allowed for statistical purposes.

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